Inflation hits 47-year high of 27.3pc

ISLAMABAD: Pakistan’s inflation measured by the consumer price index (CPI) has hit a 47-year high by accelerating to 27.3 per cent in August 2022, the level last seen in May 1975, while still the full impact of massive flooding on the prices of food items and other commodities is yet to come.

It is to be noted that Pakistan’s CPI inflation averaged 7.94 per cent from 1957 to 2022, while reaching an all-time high of 37.8 per cent in December 1973 and a record low of minus 10.32 per cent in February 1959.

Pakistan has been grappling with extreme inflation for months, especially in the last few months when the government started increasing petroleum products’ prices on May 26, 2022, by cutting down subsidies on POL prices. It was one of the major demands of the IMF for the revival of its loan programme for Pakistan.

Later, the government also increased the electricity base tariff by Rs 7.91/unit for FY2022-23, which is being collected from power consumers in phases. Besides, the upward monthly fuel charges adjustment (FCA) by the National Electric Power Regulatory Authority (Nepra) also exacerbated the situation.

Coupled with the high commodity prices in the global market, the increase in POL prices and electricity tariffs, inflation started galloping. In May 2022, the CPI was 13.8 per cent; in June, it jumped to 21.3 per cent and in July to 24.9 per cent, the Pakistan Bureau of Statistics (PBS) said on Thursday. In the same month of last year (August 2021), the CPI was 8.4 per cent.

On a month-on-month basis, the inflation increased by 2.4 per cent in August 2022 as compared to an increase of 4.3 per cent in the previous month and an increase of 0.6 per cent in Aug 2021. The skyrocketing inflation has now turned into a ‘politically sensitive’ subject. It gives a window of opportunity to the political opposition to call for fresh general polls. Since, the ouster of Imran Khan, calling for early general elections is his consistent demand.

Economists view inflation as an ‘invisible tax’ on cash holders, eroding the purchasing power of money. The rupee’s shedding its value against the dollar further catalyzes the eroding purchasing power of millions of Pakistanis.

The majority of Pakistanis spend over one-third of their incomes on purchasing food items and 23.6 per cent on house rent and utility charges. During the month, the food inflation rose by 29.53 per cent and housing and utilities charges upped by 27.57 per cent over a year ago.

It is to be noted that the State Bank of Pakistan, for the last year, has been on an ‘aggressive quantitative tightening’ course to rein in high inflation. Since July 2021, the bank has more than doubled its discount rate from 7 per cent in July 2021 to 15 per cent now. But independent economists have a dissenting view, saying that since this inflation is cost-push instead of demand-pull, it will not serve the purpose but hit the country’s GDP growth.

The PBS further reported that in August 2022, transportation charges were 63 per cent against eight per cent in August 2021. Food and non-alcoholic beverage prices increased 29.5 per cent against 9.96 per cent in Aug 2021, house rent and utility charges (water, electricity, gas and fuels) 27.57 per cent (7.96pc in Aug 2021), restaurants and hotelling 27.4 per cent (7.3pc in Aug 2021) and alcoholic beverages and tobacco went costlier by 25.78 per cent in August against only 2.12 per cent a year ago.

Similarly, furnishing and household equipment maintenance charges went up 21.86 per cent against 9.6 per cent last year, and recreation and culture 21.78 per cent against 6.4 per cent in the same month last year. Clothing and footwear costs also increased by 17.6 per cent (9.3 per cent), health charges by 11.9 per cent (8.5 per cent) and education charges by 10 per cent against 2.9 per cent in August 2021.

According to the PBS data, another indication of inflation, wholesale price index (WPI), also increased by 41.2 per cent in August 2022 against the increase of 38.5 per cent in July 2022 and an increase of 17.1 per cent in Aug 2021. The WPI inflation on a month-on-month basis increased by 3.1 per cent in August 2022 as compared to an increase of 2.0 per cent a month earlier and an increase of only 1.2 per cent in Aug 2021. The increase in wholesale prices indicates that in the next month, the CPI inflation may further increase.

The weekly sensitive price indicator (SPI) also increased 34 per cent in the month under review as compared to an increase of 28.2 per cent last month and 15.9 per cent in Aug 2021. The urban inflation increased 26.2 per cent yearly in Aug 2022 as compared to 23.6 per cent in June and 8.3 per cent in Aug 2021. The rural CPI also increased 28.8 per cent on a year-on-year basis in Aug 2022 as compared to an increase of 26.9 per cent in the previous month and 8.4 per cent in Aug 2021. Over the last month, the urban inflation increased by 2.6 per cent and the rural by 2.2 per cent.

Similarly, the urban core CPI (excluding food and energy components) increased by 13.8 per cent on a YoY basis in Aug 2022 against an increase of 12 per cent in the previous month and 6.3 per cent in Aug 2021. Likewise, the rural core CPI increased 16.5 per cent on a YoY basis in Aug 2022 as compared to 14.6 per cent in the last month and 6.2 per cent in Aug 2021.

In a month, the prices of tomato increased 52.85 per cent, pulse Moong 15.27 per cent, vegetables 13.44 per cent, pulse Mash 12.47 per cent, pulse Masoor 11.76 per cent, eggs 7.53 per cent, Besan 6.5 per cent, pulse Gram 6.08 per cent, gram whole 5.67 per cent, potatoes 4.99 per cent, beans 3.07 per cent and cooking oil 2.34 per cent over the previous month. However, the prices of fruit declined by 20 per cent and chicken by 11.5 per cent.

Over the previous month, the charges for electricity increased 19.7 per cent, liquefied hydrocarbons 8.5 per cent, readymade garments 7.85 per cent, construction input items 7.53 per cent, stationery 7.29 per cent, cleaning & laundering 6.73 per cent, motor vehicle accessories 5.20 per cent and cotton cloth 4.67 per cent.

On a year-on-year basis, the prices of pulse Masoor in August increased 114.3 per cent, onions 90.5 per cent, mustard oil 81 per cent, gram whole 77 per cent, cooking oil 74.7 per cent, vegetable ghee 69.8 per cent, pulse gram 60.2 per cent, chicken 60 per cent, pulse Mash 52.7 per cent, Besan 47.8 per cent, wheat 44.5 per cent, vegetables 41.6 per cent, tomatoes 38 per cent, rice 36.3 per cent, eggs 35.3 per cent, meat 26.8 per cent and milk 25 percent over the same month of the last year.

Among non-food items, the charges for electricity on a YoY basis increased 123.4 per cent, motor fuel 84.2 per cent, stationery 44 per cent, cleaning & laundering 39.16 per cent, liquefied hydrocarbons 33.7 per cent, washing soap/detergents/matchbox 28.86 per cent, construction input items 27.8 per cent, motor vehicle accessories 27.4 per cent and cotton cloth 23.5 per cent over Aug 2021.